Mahalath is one of the two sisters you can choose sides with in the quest Sibling Rivalry.
She fights with her sister over who's creatures are best: Adah's Dragon Elves or Mahalath's Walking Armors. The first time you meet them there is a fight between two of these creatures and the Walking Armor defeats the Dragon Elf.
She serves Laiken and wants to win the competition which requires making the best fighters for Laiken to use to defeat the Black Ring and even Damian. She wants to poison her sisters Dragon Elves using Wolfsbane found on a shipwreck near Allan the alchemist.
She can be found on Sentinel Island, in a cave directly below Sassan's Tombstone.
Mindread: We have been down here so long. Does Laiken remember us?